Personal transportation has become an essential part of modern society as people have left urban settings for suburban and rural lifestyles. No longer can income earners rely solely on public transportation to travel to the job site. Likewise, the proliferation of supermarkets and shopping centers located beyond walking distance from a residence requires the use of personal transportation to feed and clothe a household.
Personal transportation generally takes the form of a motor vehicle such as an automobile, motorcycle or light truck. The vast majority of payment arrangements for acquisition of these vehicles is through financing. The traditional method for financing the purchase price of personal transportation has been for the purchaser to negotiate a loan with a financing institution, generally a bank or credit union.
In recent years, leasing, rather than purchasing, has become popular. Leasing generally requires little or no down payment and the monthly payments are generally 30 to 40 percent less than a traditional loan of the same term. When a vehicle is purchased, the buyer pays the vehicle's full cost. However, when leased, payment is only for the portion of the vehicle's value that is used, because at the end of the lease the vehicle still has a remaining (residual) value.
Under conventional leasing methods, the lessee signs a lease agreement with the lessor in which the lessee agrees to pay a specified monthly fee for a specified period of time, generally two to five years, in exchange for the use of the vehicle over that specified period of time. The monthly fee is based primarily on the vehicle's anticipated depreciation over the term of lease plus interest and service charges.
Conventional leasing methods include a Closed End (Walk Away) lease and an Open End (Finance) lease. In the Closed End lease, the lessee is not responsible for any depreciation risk at the end of the lease. There is an opportunity for the lessee to purchase the vehicle at the end of the lease for the fair market value, however, there is no obligation to do so. In the Closed End lease, the lessee is only responsible for abnormal wear and/or excessive mileage on the vehicle, if any.
In the Open End lease, a predetermined price is set at the start of the lease for which the lessee may buy the vehicle at lease end. However, if the lessee decides not to purchase the vehicle at the end of the lease, the lessee is responsible for the residual value when the lease period is over. Should the vehicle be worth more than the anticipated residual value, the lessee receives the difference.
Despite the demonstrated need for a motor vehicle in modern society, more than sixty percent of all potential purchasers/lessees visiting dealerships do not qualify for conventional financing due to a variety of different factors, including a poor credit history, no credit history and/or a perceived inability to make payments. Thus, there is an ongoing need for improved methods and systems that permit credit challenged consumers, i.e. consumers that do not qualify for conventional financing, to obtain personal transportation, while maintaining the risk position of a lessor at an acceptable level. The present invention fulfills this need, and further provides related advantages.